A "FAIR TAX" thread so U_D can "tear me to shreds..."

[Ishmael]

Sorry to break it to you, big guy, but most of the income taxes are individual and payroll taxes, not so much corporate income taxes.

"Estimated receipts for fiscal year 2009 are $2.7 trillion (+7.1%).

* $1.21 trillion - Individual income tax
* $949.4 billion - Social Security and other payroll taxes
* $339.2 billion - Corporate income tax
* $68.9 billion - Excise taxes
* $29.1 billion - Customs duties
* $26.3 billion - Estate and gift taxes
* $47.9 billion - Other"

And while some of the individual income is taken out of businesses, it's still individual income, not corporate.

But let's assume your other points are correct. Tell us then the answers to these two riddles:

- if the rich pay less, and clearly they do, since the fair tax is less than the top income tax rate, and they don't spend all their income, and the poor pay the same (not much), how do the middle class NOT pay more if it's revenue neutral? It's not just me that notes this.

- the reason we save by "evaporating" the costs in the supply chain is because we pay those poor guys less, right? Since they're not getting their income taxed, it's only fair. But now they're screwed when everything they want to buy costs more. [restatement of post just above.]

*chuckle*

Your stats do NOTHING to disprove my orignal statement. Those 'individuals' are in realtiy businesses. LLC's, sole proprietorships, partnerships, and most sub 'S' corps file under the 1040 individual return. As such they are reported in the 'individual income' category.

Under the Fair Tax the poor would pay virtually nothing, the prebate is to relieve of the most onerous and regressive tax of all, the payroll taxes. And you still miss the point that there would be little change in the tax burden on the middle class, what you are seeing is nothing more than a breakout of a new tax category that CAN NOT be quantified under our existing system.

Even so, I have conceded that the tax burden on the middle class will increase slightly provided that there is no change in their spending habits. The middle class just happens to purchase more non-essential junk as a proportion of income than the other quintile groups. You have to keep in mind that those purchases are voluntary in nature, they would be making a concious choice to pay the tax as opposed to being relieved of their income by force.

So your consistent whining and engaging in class warfare is falling on deaf ears here. The middle class will not be FORCED to pay more than anyother group when broken down on an individual basis. What they pay will be paid as a matter of choice not under threat of incarceration or government sanctioned violence.

Ishmael

 

[Frisco_Slug_Esq]

I don't know that it's a fallacy...it's part of being revenue neutral. It's based on the math, as even the fair tax organization admits.

They could make the tax percentage number smaller, but you need 30% exclusive to compensate for 23% inclusive and be revenue neutral. Or so they claim. Disagree? Take it up with the sponsors of the bill.

Again, what happened when JFK, Reagan, and Bush decreased taxes?

Revenues went up. (Unfortunately, so did spending, that's our biggest problem.)

Under the fair tax, you get "revenue neutrality" because you get increased activity due to lower costs and the activity brings in the additional taxes.

Furthermore, everyone at every end of the economic scale has greater purchasing power AND by getting away for taxing income and taxing the transaction you tax those who criminally or due to great wealth have actually been effectively avoiding taxation on a routine basis.

inclusive/exclusive is a red herring designed to take your eye off the ball and expose the weakness (of everyone else, not you) of the economic curriculum in our schools; it's easy to scream and thrash about about how the "shortfall" MUST be made up if you are taught economics as a zero sum game...

 

[Frisco_Slug_Esq]

*chuckle*

Your stats do NOTHING to disprove my orignal statement. Those 'individuals' are in realtiy businesses. LLC's, sole proprietorships, partnerships, and most sub 'S' corps file under the 1040 individual return. As such they are reported in the 'individual income' category.

Under the Fair Tax the poor would pay virtually nothing, the prebate is to relieve of the most onerous and regressive tax of all, the payroll taxes. And you still miss the point that there would be little change in the tax burden on the middle class, what you are seeing is nothing more than a breakout of a new tax category that CAN NOT be quantified under our existing system.

Even so, I have conceded that the tax burden on the middle class will increase slightly provided that there is no change in their spending habits. The middle class just happens to purchase more non-essential junk as a proportion of income than the other quintile groups. You have to keep in mind that those purchases are voluntary in nature, they would be making a concious choice to pay the tax as opposed to being relieved of their income by force.

So your consistent whining and engaging in class warfare is falling on deaf ears here. The middle class will not be FORCED to pay more than anyother group when broken down on an individual basis. What they pay will be paid as a matter of choice not under threat of incarceration or government sanctioned violence.

Ishmael

He voted for the "Progressive" McCain.

I think there is a "Robin Hood" mentality to our current tax code that appeals to the far-right Christian sense of charity and voluntary redistribution of wealth as equally as it appeals to the Marxist doctrines of compulsory redistribution of wealth...

There's a nobility in it worth fighting for in the name of "fairness" much like the recent thread about income level being considered along with test scores into a "gifted program."

 

[Ishmael]

He voted for the "Progressive" McCain.

I think there is a "Robin Hood" mentality to our current tax code that appeals to the far-right Christian sense of charity and voluntary redistribution of wealth as equally as it appeals to the Marxist doctrines of compulsory redistribution of wealth...

There's a nobility in it worth fighting for in the name of "fairness" much like the recent thread about income level being considered along with test scores into a "gifted program."

How sad that is. It reflects a profound ignorance of the lesson to be learned from the tale of Robin Hood as well as a confusion between charity and theft.

Ishmael

 

[Saint Peter]

Quit bitching.

Pay your taxes.

Win the election next time and tax me twice as hard.

 

[Frisco_Slug_Esq]

How sad that is. It reflects a profound ignorance of the lesson to be learned from the tale of Robin Hood as well as a confusion between charity and theft.

Ishmael

Everyone forgets Robin was stealing from the state ('s agents)...



Yes Petey, we must ALL be Patriots now!

 

[Saint Peter]

Yes Petey, we must ALL be Patriots now!

Uncle Sam could care less. Just pay your taxes and live clean.

 

[firespin]

Hmm. Ishmael is here. I can't believe I'm doing this, but, to this point:

Well, for openers, do you understand the whole two rates, 23% inclusive = 30% exclusive, yet?

Ishmael, would you mind explaining to AJ that the Fair Tax bill introduced in congress would impose a national sales tax that is approximately 30% as sales taxes are normally computed, i.e. a $1.00 item would cost $1.30, and not a 23% exclusive rate, as AJ seem to think?

And yes, there's an argument that for some 1.00 items, they would be repriced to $.77, but then they would still be taxed at 30%, again exclusive, and we'd be back at a dollar.

He seems to have some trouble with this concept, and starts going on about macroeconomic growth based on lower prices...when prices won't go down after tax.

 

[unregistered]

 

[Frisco_Slug_Esq]

Hmm. Ishmael is here. I can't believe I'm doing this, but, to this point:



Ishmael, would you mind explaining to AJ that the Fair Tax bill introduced in congress would impose a national sales tax that is approximately 30% as sales taxes are normally computed, i.e. a $1.00 item would cost $1.30, and not a 23% exclusive rate, as AJ seem to think?

And yes, there's an argument that for some 1.00 items, they would be repriced to $.77, but then they would still be taxed at 30%, again exclusive, and we'd be back at a dollar.

He seems to have some trouble with this concept, and starts going on about macroeconomic growth based on lower prices...when prices won't go down after tax.

Yeah Ish, because he doesn't believe the FairTax website, but he might believe you!

I, for the life of me, don't get where he keeps coming up with 30% when the bill itself says 23%

the rate of tax is 23 percent of the gross payments for the taxable property or service.

http://www.govtrack.us/congress/bill.xpd?bill=h111-25
http://www.govtrack.us/congress/billtext.xpd?bill=h111-25

 

[Frisco_Slug_Esq]

Revenue goes up, spending follows. It's a sad fact. It's almost as if the goal is to spend irresponsibly. Somehow we have to impose a political or legal discipline on the Congress.

That would require a strong President with the desire to do that and had the ears of the people.

Either that, or a "fire-them-all" mentality.

This fall would be a good start to the latter...

 

[firespin]

*chuckle*

Your stats do NOTHING to disprove my orignal statement. Those 'individuals' are in realtiy businesses. LLC's, sole proprietorships, partnerships, and most sub 'S' corps file under the 1040 individual return. As such they are reported in the 'individual income' category.

Under the Fair Tax the poor would pay virtually nothing, the prebate is to relieve of the most onerous and regressive tax of all, the payroll taxes. And you still miss the point that there would be little change in the tax burden on the middle class, what you are seeing is nothing more than a breakout of a new tax category that CAN NOT be quantified under our existing system.

Even so, I have conceded that the tax burden on the middle class will increase slightly provided that there is no change in their spending habits. The middle class just happens to purchase more non-essential junk as a proportion of income than the other quintile groups. You have to keep in mind that those purchases are voluntary in nature, they would be making a concious choice to pay the tax as opposed to being relieved of their income by force.

So your consistent whining and engaging in class warfare is falling on deaf ears here. The middle class will not be FORCED to pay more than anyother group when broken down on an individual basis. What they pay will be paid as a matter of choice not under threat of incarceration or government sanctioned violence.

Ishmael

So, it seems the fair tax is designed to facilitate social engineering?

The "prebate" is to cover what people need. Makes no difference where they live, their personal situation, their choices. All those decisions are taken care of by the state.

Beyond that, people will be fine as long as they forego things they have now, since those things are "non-essential junk". Again, we'll make the decisions for them. We know so much better what's essential.

I have no problem with portraying the fair tax as a consumption tax, similar in some ways (and different in others) to a VAT. And, as I've said, I don't care if we want to decide to tax the rich less. There' no class war here, O not-so-perceptive one. (How's Igor's goat lately?) But to suggest that it raises the same amount of revenue while everybody pays the same or less taxes is fraud.

 

[Frisco_Slug_Esq]

Uncle Sam could care less. Just pay your taxes and live clean.

The Rev'rund Shaprton says, "I shower TOO!"

 

[firespin]

Yeah Ish, because he doesn't believe the FairTax website, but he might believe you!

I, for the life of me, don't get where he keeps coming up with 30% when the bill itself says 23%



http://www.govtrack.us/congress/bill.xpd?bill=h111-25
http://www.govtrack.us/congress/billtext.xpd?bill=h111-25

So somebody pays $1.30 for gas, and the feds get 23% of that.

23% of 1.30 would be..oh, look at that, 30 cents. So it's like gas was a dollar and 30 cents was added as tax.

See? Is that so hard?

 

[Frisco_Slug_Esq]

So, it seems the fair tax is designed to facilitate social engineering?

The "prebate" is to cover what people need. Makes no difference where they live, their personal situation, their choices. All those decisions are taken care of by the state.

Beyond that, people will be fine as long as they forego things they have now, since those things are "non-essential junk". Again, we'll make the decisions for them. We know so much better what's essential.

I have no problem with portraying the fair tax as a consumption tax, similar in some ways (and different in others) to a VAT. And, as I've said, I don't care if we want to decide to tax the rich less. There' no class war here, O not-so-perceptive one. (How's Igor's goat lately?) But to suggest that it raises the same amount of revenue while everybody pays the same or less taxes is fraud.

People will pay more in taxes. One, you expand the base of people paying, by taxing the avoiders, by bringing home business, and by having gone from a business hostile to a business-friendly environment, it would even attract foreign corporate headquarters...

Two, they will have more money to spend. We have a consumer society and people will spend. I know, that you see, on paper, HEY, physically, the middle class will be paying MORE taxes. But as Ish pointed out earlier, they are already PAYING those taxes, they just don't see them and that they are passed on to them. In fact, what will happen is that they will get a reduction in taxes realized in the savings as the cost of their Fairtax Widgets go down.

Te fraud is in the current system that purports to Robin-Hood the rich...

 

[Ishmael]

Hmm. Ishmael is here. I can't believe I'm doing this, but, to this point:



Ishmael, would you mind explaining to AJ that the Fair Tax bill introduced in congress would impose a national sales tax that is approximately 30% as sales taxes are normally computed, i.e. a $1.00 item would cost $1.30, and not a 23% exclusive rate, as AJ seem to think?

And yes, there's an argument that for some 1.00 items, they would be repriced to $.77, but then they would still be taxed at 30%, again exclusive, and we'd be back at a dollar.

He seems to have some trouble with this concept, and starts going on about macroeconomic growth based on lower prices...when prices won't go down after tax.

Of course I do. It's the same as the current income tax. All you do is twist the numbers around a bit.

If you make $100K and pay $25K in taxes you are paying 25% inclusive and 33% exclusive. It's sorta like gross vs. net. The tqaxes paid represent 25% of gross, but are 33% of net. The detractors of the Fair Tax have been trying to make hay with this argument for years now but they are truly making a comparison between apples and oranges. It's just another 'fun with numbers' trick.

They also fail to figure in the 15.3% that is being paid off the top in the form of the payroll tax. I'm sure someone is going to argue that they only pay 7.515%. Let me assure you and that 7.515% you don't think you're paying is coming right out of your paycheck. It is all part of what an employer uses to compute the cost of your employment. Here's how it works; the employer decides what he can afford to pay you, let's call that X. They then add up all the costs of employing you, payroll taxes, vacation, various insurances, and anyother benefit, we'll call that Y. They then subtract Y from X and come up with Z, and Z is what you get paid. (Note that there is NO line item deduction for payroll taxes on your 1040 so inreality you are paying an unadjusted 15.3% of gross along with whatever you are paying on your adjusted gross. So if you managed to get your adjusted taxes down to 20% of gross you are still paying 35.3%. Hope that made your day.)

Ishmael

 

[Frisco_Slug_Esq]

So somebody pays $1.30 for gas, and the feds get 23% of that.

23% of 1.30 would be..oh, look at that, 30 cents. So it's like gas was a dollar and 30 cents was added as tax.

See? Is that so hard?

No, currently the feds get their taxes from the 23% percent imbedded tax-liability costs associated with the base price of gas, then they add over 30¢ in additional taxes...

I know the oil is imported, but it's refined, distributed and marketed here.

 

[Frisco_Slug_Esq]

Of course I do. It's the same as the current income tax. All you do is twist the numbers around a bit.

If you make $100K and pay $25K in taxes you are paying 25% inclusive and 33% exclusive. It's sorta like gross vs. net. The tqaxes paid represent 25% of gross, but are 33% of net. The detractors of the Fair Tax have been trying to make hay with this argument for years now but they are truly making a comparison between apples and oranges. It's just another 'fun with numbers' trick.

They also fail to figure in the 15.3% that is being paid off the top in the form of the payroll tax. I'm sure someone is going to argue that they only pay 7.515%. Let me assure you and that 7.515% you don't think you're paying is coming right out of your paycheck. It is all part of what an employer uses to compute the cost of your employment. Here's how it works; the employer decides what he can afford to pay you, let's call that X. They then add up all the costs of employing you, payroll taxes, vacation, various insurances, and anyother benefit, we'll call that Y. They then subtract Y from X and come up with Z, and Z is what you get paid. (Note that there is NO line item deduction for payroll taxes on your 1040 so inreality you are paying an unadjusted 15.3% of gross along with whatever you are paying on your adjusted gross. So if you managed to get your adjusted taxes down to 20% of gross you are still paying 35.3%. Hope that made your day.)

Ishmael

Boy, he sure put ME in my place!

Thanks firespin! You're the best! I have to "run away" from the discussion now! It's time to start school, HOME SCHOOL! I want my kid to be able to think...

 

[RobDownSouth]

Congress can offset that in a heartbeat. Besides, most of them WANT the price to shoot up to save the environment.

Keep flinging...

Paris Hilton will actually pay more in taxes because she's a shop-a-holic...

How exactly can Congress "offset" a commodity price?

Show us.

You're flailing wildly now.

 

[firespin]

No, the widgets are CHEAPER!

*sigh*

$1.00-$1.00*.23= $0.77
$0.77*.23= .1771
Fairtax Widget = $0.95

OK, now that we have you back on the reservation, can you note that if the tax on a 0.95 transaction was 17.7 cents, the tax rate on the gross transaction price was 18.6%, not 23%, as the law called for?

Meaning the 17.7 cent tax was too low.

Should have been 23 cents.

 

[firespin]

No, currently the feds get their taxes from the 23% percent imbedded tax-liability costs associated with the base price of gas, then they add over 30¢ in additional taxes...

I know the oil is imported, but it's refined, distributed and marketed here.

Mr. Wizard,

The 23% embedded liability costs are an average across all classes of purchases, not necessarily the costs for any given product. For something like gasoline, they are certainly much less than 23%, since most taxes are those paid to people, and energy is very automated with few employees per dollar of revenue, so not much collected in the form of payroll and income taxes, which are the bulk of federal tax collections.

The federal taxes are less than 20 cents / gallon...perhaps you were including state taxes?

 

[Ishmael]

OK, now that we have you back on the reservation, can you note that if the tax on a 0.95 transaction was 17.7 cents, the tax rate on the gross transaction price was 18.6%, not 23%, as the law called for?

Meaning the 17.7 cent tax was too low.

Should have been 23 cents.

I don't know which bill you're reading but from HR-25 Sec. 2 (a) (13)

"TAX INCLUSIVE FAIR MARKET VALUE- The term `tax inclusive fair market value' means the fair market value of taxable property or services plus the tax imposed by this subtitle."

Therefore if the fair market value is indeed $0.77. then the tax computation is absolutley correct.

The assumption that AJ made was the assumption of the current 23% imbedded tax. 23% is the mean with the true ammount varying from industry to industry. The rate varies from a low of 17% to a high of 30%. Domestically produced goods (and obviously services) would enjoy an advantage over foriegn produced goods. I think that it would be hard to argue that that is a bad thing. Regardless, once more the computation is correct. If a product currently sells for $1, AND the embedded tax is indeed 23%, then the new fair market value would be $.77.

Now, we can get into all sorts of discussions as to how quickly the various manufacturers and service providers would back the cost of the embedded tax out of their offerings. In most instances market pressures would cause that to happen rather quickly. I can see some cases where a provider might not back out all embedded tax costs and instead give their employees a raise based on a portion of the savings. I can see other instances where the provider attempts to reap a windfall from the enactment, and they most certainly would until such time as someone saw a competitive window of opportunity. I suspect that the entire shake out cycle might take as long as two years.

From the consumer standpoint the tax on essentials is offset by the prebate, and for a family of four that would amount to approximately $450/mo. Further they would be taking home their entire check, zero deductions. If you are being paid $20/hr and you work 40 hours you will recieve a check for $800. Again for a family of four this would amount to $3650/mo. take home for a four week month. Contrast that to a take home of $2400 under the current tax code. (This assuming an avg. tax rate of 18% PLUS the 7.5% payroll deduction.)

The initial sticker shock of higher retail prices (the assumption here is that not all prices will fall immediately upon enactment) will be a further incentive for providers to lower their prices quickly.

Ishmael

 

[firespin]

I don't know which bill you're reading but from HR-25 Sec. 2 (a) (13)

"TAX INCLUSIVE FAIR MARKET VALUE- The term `tax inclusive fair market value' means the fair market value of taxable property or services plus the tax imposed by this subtitle."

Therefore if the fair market value is indeed $0.77. then the tax computation is absolutley correct.

The 0.77 was net of taxes, not tax inclusive.

So, no.

 

[Ishmael]

The 0.77 was net of taxes, not tax inclusive.

So, no.

Wrong. Fair market value is the price set by the POS retailer or service provider. In that the legislation has NO provisions for the government to determine the fair market value it's the only way it can work.

What you are suggesting is that the government says that the price was $1.00 then and that's what we're going to tax regardless of any new price you may set. Under that model the new price will be $1.23 regardless of what lower price the provider may set.

Perhaps you are suggesting something that I'm missing. The language is quite clear to me, it is the fair market value, as set by the provider because that is the ONLY place it can be set, PLUS the 23% tax on that set value. If you have something else in mind, write the formula out, after all it's all numbers.

Ishmael

 

[firespin]

Wrong. Fair market value is the price set by the POS retailer or service provider. In that the legislation has NO provisions for the government to determine the fair market value it's the only way it can work.

What you are suggesting is that the government says that the price was $1.00 then and that's what we're going to tax regardless of any new price you may set. Under that model the new price will be $1.23 regardless of what lower price the provider may set.

Perhaps you are suggesting something that I'm missing. The language is quite clear to me, it is the fair market value, as set by the provider because that is the ONLY place it can be set, PLUS the 23% tax on that set value. If you have something else in mind, write the formula out, after all it's all numbers.

Ishmael

Look back at where I go the numbers from.

AJ was postulating that a widget that used to cost a dollar would now be 95 cents, because it would lose 23 cents of embedded taxes, but the tax added would only by 23% of the lower price.

I was pointing out that this would not collect enough tax, or (alternatively) result in less than 77 cents, so the price would really need to be a dollar to net 77 cents.

You could look it up.